USD/JPY faces barricades around 128.50, DXY steadies, Japan’s Inflation in focus

• USD/JPY is observing selling pressure around 128.50 amid broader strength in yen.
• A disclosure of less negative GDP numbers by Japan has strengthened the yen bulls.
• Investors should brace for the continuation of BOJ’s ultra-loose monetary policy.

The USD/JPY pair has witnessed a minor rebound after hitting a low of 128.00 in the late New York session. The pair faced decent selling pressure on Wednesday despite a broader strength in the greenback. It is worth noting that the heightened risk-off impulse in the market is underpinning the greenback against the majority of the risk-sensitive currencies. However, the Japanese yen has shown strength against the greenback bulls, which indicates that yen bulls are gaining their safe-haven glory.

The yen bulls have strengthened against the greenback after displaying less negative Gross Domestic Product (GDP) numbers on Wednesday. The annualized figure for Japan’s GDP remains higher at -1% against the consensus of -1.8%. While the quarterly figure landed at -0.2% remained negative but still outperformed the forecasts of -0.4%.

The Japanese economy has yet not recovered its growth rate that could match its pre-pandemic levels. Therefore, the Bank of Japan (BOJ) will continue with its ultra-loose monetary policy. Going forward, the weekly major event will be the release of Japan’s inflation on Friday. The annual National Consumer Price Index (CPI) is seen at 1.5% against the prior print of 1.2%. The unavailability of inflationary pressures will push the BOJ to keep infusing liquidity into its economy.

Meanwhile, the US dollar index (DXY) is auctioning in a tight range below 104.00 amid a light economic calendar this week. The asset has gained significant bids on Wednesday as risk-off impulse soars on mounting price pressures.